News Corp stumbles in third quarter, reports $149M loss

Revenue fell 7 percent, and the company had to account for a $280 million pre-tax charge at News America Marketing to resolve a legacy lawsuit brought by coupon clients

The part of the old News Corp that was spun off, yet retained the News Corp name, has generally performed far better than the other newspaper companies that were recently spun off. Unlike Gannett or Tribune Publishing, the new News Corp is still pretty diversified. Sure, it lost its movie and broadcast divisions, but the new News Corp is more than just newspapers. It also includes book publishing, and added digital real estate services when it picked up Move, the publisher of realtor.com.

But today News Corp reported its third quarter earnings and it admits that it stumbled a bit.

“The third quarter results were materially affected by a $280 million pre-tax charge at News America Marketing to resolve a legacy lawsuit and related claims, and continued currency headwinds, which impacted revenues by $72 million and EBITDA by $9 million. Excluding those and other items, revenues and EBITDA declined 5% and 8%, respectively, which was still disappointing,” Chief Executive Robert Thomson said.

“We believe, however, that the company is on track to see improvements in the fourth quarter, with the expansion of our digital real estate business, foreign currency comparisons hopefully beginning to ease, and cost saving initiatives taking firmer root.”

The new News Corp has four segments, with its newspapers still its largest one. In Q3, revenue for the News and Information Services division fell 9 percent. Total ad revenue fell a whopping 15 percent, though some of this is attributable to negative foreign currency fluctuations.

The lawsuit that Thomson alluded to in the quote above involves a complaint filed by Dial and Kraft Heinz Co. that alleged News Corp broke anti-trust laws, using its monopoly position to keep prices for its coupon clients artificially high. This is a division that, while wildly profitably, has had to settle claims from its competitors in the past, including Floorgraphics, Valassis and Insignia Systems. A lawsuit from a CPG is never good because generally means losing business from that client going forward (though it is amazing how sometimes these things are soon forgotten).

News Corp’s book publishing business also had a bad quarter, with revenue falling 11 percent as the publisher was up against a quarter where last year it had the Divergent series by Veronica Roth and American Sniper by Chris Kyle selling well.

Revenues for the Digital Real Estate Services segment increased $24 million, or 14 percent, as this division continues to show good growth, though not nearly enough to compensate for declines in revenue in the newspaper and book publishing divisions.

“While we believe in the strength of our print properties, we are also investing energetically in the rapid pursuit of digital which is clearly evident in the transition at Dow Jones,” Thomson said. ” At Dow Jones this quarter, digital accounted for more than 50% of total revenues for the first time, and digital-only subscribers at the Wall Street Journal grew to 893,000, representing nearly 45% of the base. We are building a strong digital platform on top of the WSJ print circulation which today is double the size of its nearest competitor.”